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Thursday, 11 August 2016

India's real estate sector is again emerging as key hub for investment

India's real estate is back on the radar of global investors and institutions with the country emerging as the other significant investment option in the wake of China slowing down, said Henry Chin, head of research for Asia Pacific at property advisory firm CBRE.

"The Modi government has played the role of a very good catalyst and in the last 18 months, interest in India has been growing among occupiers and investors alike," said Chin. He cited the example of large institutional investors such as Blackstone, Brookfield and JP Morgan who have a presence in India now and are investing large sums of money in the Indian real estate. Recently, Chinese developer Wanda group also evinced interest in developing large projects in the country, Chin said. While the residential real estate market in India has seen slow growth over the last many quarters, the last one year was particularly good for the office leasing segment in the country.

Chin said leasing activity has been good so far this year and will continue to be strong in the second half of 2016. "Last year, Bengaluru was the strongest among all Asia Pacific markets in terms of office space leasing, and demand for the city is continuing to grow," he said.

The demand for office space, he said, is coming from the IT and BPO sectors as well as from banking, financial services and insurance (BFSI), pharma, engineering and automotive segments. There has been some contraction in office demand from the ecommerce of late but companies in that segment have taken up more logistics and warehousing space as businesses grow. "We are also noticing that a lot of projects in the industrial parks space that were shelved by builders for sometime now are coming back on track," said Chin. According to him, global investors and institutions are also taking note of the changing regulations in India, especially those relating to real estate investment trusts (REITs).

"Most people are talking about Indian REITs. We think there are multiple factors for the success of REITs in any market. I think India is 50% there at the moment," said Chin. "There are still a few things on the tax efficiency front and on the regulatory framework that need some work."

India has around 200 million sq ft of REIT-able space available. Earlier this week, the Securities and Exchange Board of India (Sebi) proposed further relaxed norms for REITs, specifically on related party transactions, and also suggested allowing REITs to invest more money in under construction projects. If the proposal is accepted, REITs will be able to invest up to 20% in under-construction projects compared with 10% currently allowed.

Chin said the other piece of regulation that people are talking about is the Real Estate Regulatory Act (RERA), which, when implemented fully, is likely to help augment foreign capital flow into the Indian residential real estate segment.